The buck stops here for costly American shares

EVERY week, Tony Hetherington replies to readers' letters, adding comments, advice and the results of his enquiries.

If you think you are a victim of financial mismanagement, or want advice before investing, write to Tony Hetherington, Financial Mail, 2 Derry Street, London W8 5TS. Sorry, but he cannot give personal replies. Please send only copies of documents - if these are relevant to your enquiry. We regret that they cannot be returned.

A. B. writes: I invested £8,000 in three American companies through a German firm called Intersecurities and fear I have made a big mistake. All stocks are 'Regulation S', an American rule that means they have to be held for at least a year. They are all trading at a huge deficit. What action can I take?

FRANKFURT-based Intersecurities is licensed by the German financial regulator, Bafin. Though it is acting legally, the fact that it is authorised by a foreign watchdog means you lose the protection of our Ombudsman and our compensation scheme.

Intersecurities specialises in selling shares in small companies. According to its advertising: ' Intersecurities places a high degree of importance on ensuring that any investment initiated receives the appropriate level of risk profiling and is tailored to the investment objectives of each client.'

You have told me that after losing heavily in technology shares, you were cautious, so I asked Intersecurities for a copy of any Fact Find it completed before suggesting which stocks might suit you. Despite having your authority, Intersecurities refused to reveal its Fact Find, citing data protection grounds.

However, its compliance officer, Frank Blache, did tell me that you had placed a ceiling of 15 per cent on the amount of your money that could go into high-risk stocks.

He interpreted this as 15 per cent of your total assets, which he says the confidential Fact Find shows as £50,000 or more. You interpreted it as 15 per cent of the money you invested through Intersecurities, which explains why the discovery that all of your shares are high risk has come as a nasty surprise.

Intersecurities insists it told you that high-risk Regulation S stocks cannot be sold to American investors. You have told me: 'The only important stipulation made was that they must be kept for at least one year prior to sale. No mention was made of the fact that they are high risk.' Another reader's experience reflects yours. Mr J told me he invested £14,000 in five stocks recommended by Intersecurities. Every one turned out to be a highrisk Regulation S stock. The only one showing a notional gain was still unsaleable under the one-year rule.

Mr J kept a copy of his Fact Find. It shows he is a comparatively inexperienced investor, so it is hard to see why he would be steered towards anything as complex as Regulation S stocks.

One explanation is that Intersecurities is not just paid by its investors; it is also rewarded handsomely by the US companies themselves, or people associated with them, for unloading their shares in Europe while they cannot be sold in America.

I asked Blache how much his company earned by selling shares to you and Mr J. He refused to tell me.

The bottom line is that you can complain to Bafin in Germany. Write to: Bundesanstalt fur Finanzdienstleistungsaufsicht, Graurheindorfer Strasse 108, 53117 Bonn.

I wish I could be optimistic, but tackling alleged mis-selling in Britain is hard enough. Dealing with a foreign regulator will not be easy.

I am afraid your experience and that of Mr J might achieve nothing more than to serve as a warning to other investors that while American Regulation S stocks are legal, they can also be highly dangerous.

We were wrong says the bank as it pays £2,000 at the double

Mrs B. A. L. writes: Acting for an elderly aunt suffering from senile dementia, I had to transfer her savings into the Court of Protection account. I sent the court order to Cheltenham & Gloucester, Scottish Widows, Lloyds TSB and Bradford & Bingley.

There were no problems with the first three, but six months later the first account statement from the court showed that the Bradford & Bingley money was not there. I was told that part of the court order went missing between my aunt's branch and the head office and this was never followed up. Bradford & Bingley did not accept that it was negligent and I have rejected an offer of three months' interest for my aunt. I feel she should receive the amount she would have had if the money had been lodged with the court.

I THINK the people dealing with this at Bradford & Bingley locked themselves into a defensive position when they should simply have admitted that they had made a mess of the matter. The whole issue could not have been sorted out faster when I contacted B&B's head office.

I was immediately told that you were right, that three months' interest was not enough, and that your aunt's account would be credited with every penny she would have received had the court order been applied correctly. The account will be credited with £2,000 arrears of interest at once.